Japan quake reconstruction may cost up to $184 bln

(Reuters) - Japanese Economics Minister Kaoru Yosano said on Sunday the government may need to spend 10 trillion yen to 15 trillion yen ($184 billion) for reconstruction from the devastating earthquake that hit the country’s northeast in March.

The government may need to issue bonds to meet the costs but should not do so without coming up with ways to pay for redemption, Yosano said, signalling that some form of tax hike would be inevitable.

“I understand those who say we need to issue bonds for quake (reconstruction). But we shouldn’t borrow recklessly without thinking about how to pay the money back,” Yosano told a television programme.

“If we were to issue bonds for reconstruction, we need to decide in how many years we would pay the money back and how. That’s important in maintaining market trust in Japan’s fiscal state,” he said.

Japan is reeling from the triple disaster of an earthquake, tsunami and prolonged nuclear crisis, with the government struggling to find ways to pay for the biggest reconstruction effort since the aftermath of World War Two.

Damage from the quake pushed Japan into recession with the economy shrinking much more than expected in the first quarter and set to contract again in April-June as power shortages and supply chain disruptions hit factory output.

The government earlier this month passed through parliament a 4-trillion-yen first extra budget to meet immediate disaster relief costs.

It plans to compile a sizable second extra budget for reconstruction, although lawmakers are divided on how to pay for the spending.

Japan’s public debt, at double the size of its $5 trillion economy, is the biggest among major industrialised economies, limiting room for additional fiscal stimulus.

But lawmakers are hesitant of raising tax, particularly the politically sensitive sales tax, for fear of scaring voters away, even as the cost of quake reconstruction adds to the huge social welfare spending for a rapidly ageing society.

Yosano, regarded as a fiscal hawk, has said that raising tax is crucial for Japan to meet ballooning social welfare costs and fix the country’s tattered finances. ($1 = 81.610 Japanese Yen)

China, South Korea vow help in Japan recovery

(Reuters) - Japan won pledges of help on Sunday from China and South Korea in its efforts to recover from an earthquake, tsunami and nuclear crisis that rocked the nation in March, with Beijing promising to start easing curbs on Japanese food imports.

Japanese Prime Minister Naoto Kan, who hosted an annual summit of the three Asian economic powers this weekend, has counted on the event to help ease concerns at home and abroad about the safety of Japan’s nuclear facilities and farm exports.

Several countries, including China and South Korea, restricted Japanese agricultural imports after the March 11 disaster knocked out a nuclear plant on Japan’s northeast coast, releasing radiation and raising fears of food contamination. Tokyo’s worry is that, even though food makes up just 1 percent of Japan’s exports, radiation concerns could affect other goods just when the export-reliant economy plunged back into recession.

Japan has also feared that governments could go beyond what was necessary in their curbs in order to calm nervous publics, but its plea for more “reasonable” restrictions was initially rebuffed by Chinese and South Korean trade ministers last month.

There were signs of progress at the summit, with China’s Premier Wen Jiabao saying Beijing was willing to import more food from Japan if safety standards were met and South Korea promising to base its safety steps on “scientific evidence”.

According to Japanese foreign ministry officials in its first step Beijing would remove two Japanese prefectures in an area near the crippled nuclear plant from a list of 12 covered by an import ban due to radiation concerns.

The officials said China would also no longer require proof of radiation checks for food with the exception of milk products, vegetables and seafood.





 In a symbolic gesture ahead of the summit, Wen and South Korea’s President Lee Myung-bak met Kan in Fukushima city, about 60 km (37 miles) northwest of the stricken power plant at the centre of the worst nuclear crisis since Chernobyl.